US consumer prices soar on petrol cost

Washington, March 17, 2012

US consumer prices rose the most in 10 months in February as the cost of petrol spiked, but there was little sign that underlying inflation pressures were building up.

Surging petrol prices put a small dent in consumer confidence early this month, other data showed yesterday. Still, Americans do not believe the sharp run up in prices will last, according to a roper in our sister publication, the Gulf Daily News.

The Labour Department said the Consumer Price Index (CPI) rose 0.4 per cent in February after advancing 0.2 per cent in January. Petrol accounted for more than 80 per cent of the rise.

Stripping out volatile food and energy costs, the so-called core CPI edged up just 0.1 per cent.

Consumer prices rose 2.9 per cent last month from a year-ago, unchanged from January but down from a peak of 3.9 per cent in September. The core index was up 2.2 per cent over the 12 months through February, down from 2.3 per cent in January.

The Federal Reserve said the recent spike in energy costs would likely lift inflation only temporarily. Over a longer horizon, it said inflation was poised to run at or below its 2 per cent target.

Petrol prices have increased 53 cents since the start of the year to an average of $3.88 a gallon in the week to Monday.

That helped pull the Thomson Reuters/University of Michigan index on consumer sentiment down to 74.3 early this month from 75.3 in February.

Consumer expectations for inflation one year ahead jumped to 4 per cent from 3.3 per cent, but the five-year reading rose only slightly to 3 per cent and the survey’s director said Americans do not expect the steep climb in petrol costs to last.

Other data yesterday showed the economy continues to expand moderately. Production at the nation’s mines, factories and utilities held steady last month after a 0.4 per cent gain in January, the Fed said.

Manufacturing output rose 0.3 per cent, even as carmakers cut production by 1.1 per cent after two big monthly gains. Carmakers had raised production to meet pent up demand for popular models in short supply.